-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, RtBFe+d7gtr0gjkeTS5lOsptN70MbNWutn2aLXYasC0cl0PhEg84sMO1qJ174Doz 4qeJRZZNN9wsFhRyFHDoMQ== 0000889812-95-000224.txt : 19950516 0000889812-95-000224.hdr.sgml : 19950516 ACCESSION NUMBER: 0000889812-95-000224 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950515 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MRI BUSINESS PROPERTIES FUND LTD II CENTRAL INDEX KEY: 0000745289 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] IRS NUMBER: 942935565 STATE OF INCORPORATION: CA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14177 FILM NUMBER: 95539473 BUSINESS ADDRESS: STREET 1: 5665 NORTHSIDE DR NW CITY: ATLANTA STATE: GA ZIP: 30328 BUSINESS PHONE: 4049169090 MAIL ADDRESS: STREET 1: 100 JERICHO QUADRANGLE STREET 2: STE 214 CITY: JERICHO STATE: NY ZIP: 11753 10-Q 1 QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1995 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ____________ Commission file number 0-14177 MRI Business Properties Fund, Ltd. II (Exact name of Registrant as specified in its charter) California 94-2935565 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 5665 Northside Drive N.W., Ste. 370, Atlanta, Georgia 30328 (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code (404) 916-9090 N/A Former name, former address and fiscal year, if changed since last report. Indicate by check mark whether Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------ APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes No ----- ----- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date . ------------------ 1 of 15 MRI BUSINESS PROPERTIES FUND, LTD. II - FORM 10-Q - MARCH 31, 1995 PART I - FINANCIAL INFORMATION Item 1. Financial Statements. Consolidated Balance Sheets March 31, September 30, 1995 1994 (Unaudited) (Audited) Assets Cash and cash equivalents $ 5,472,000 $ 9,346,000 Restricted cash 692,000 1,921,000 Accounts receivable and other assets 4,966,000 4,835,000 Real Estate: Real estate 138,907,000 132,781,000 Accumulated depreciation (56,221,000) (53,454,000) Allowance for impairment of value (10,948,000) (10,948,000) -------------- -------------- Real estate, net 71,738,000 68,379,000 Intangible assets 1,157,000 1,187,000 -------------- -------------- Total assets $ 84,025,000 $ 85,668,000 ============== ============== Liabilities and Partners' Equity Accounts payable and other liabilities $ 3,388,000 $ 4,039,000 Due to an affiliate of the joint venture partner 174,000 91,000 Due to unconsolidated joint venture 445,000 338,000 Notes payable 56,080,000 56,814,000 -------------- -------------- Total liabilities 60,087,000 61,282,000 -------------- -------------- Minority interest in joint venture 2,711,000 2,630,000 Partners' Equity: General partners' (deficit) (2,887,000) (2,876,000) Limited partners' equity (91,083 assignee units outstanding at March 31, 1995 and September 30, 1994) 24,114,000 24,632,000 -------------- -------------- Total partners' equity 21,227,000 21,756,000 -------------- -------------- Total liabilities and partners' equity $ 84,025,000 $ 85,668,000 ============== ============== See notes to consolidated financial statements. 2 of 15 MRI BUSINESS PROPERTIES FUND, LTD. II - FORM 10-Q - MARCH 31, 1995 Consolidated Statements of Operations (Unaudited) For the Six Months Ended March 31, 1995 March 31, 1994 Revenues: Room revenue $ 16,906,000 $ 16,169,000 Food and beverage revenue 9,383,000 8,866,000 Other operating revenues 1,473,000 1,305,000 Interest 223,000 152,000 -------------- -------------- Total revenues 27,985,000 26,492,000 -------------- -------------- Expenses: Room expenses 4,023,000 3,550,000 Food and beverage expenses 7,178,000 6,702,000 Other operating expenses 10,624,000 10,866,000 Interest 3,465,000 2,917,000 Depreciation and amortization 2,797,000 2,473,000 Equity in unconsolidated joint venture's operation 107,000 152,000 General and administrative 239,000 219,000 -------------- -------------- Total expenses 28,433,000 26,879,000 -------------- -------------- Loss before minority interest in joint venture's operation (448,000) (387,000) Minority interest in joint venture's operations (81,000) 60,000 -------------- -------------- Net loss $ (529,000) $ (327,000) ============== ============== Net loss per limited partnership assignee unit $ (6) $ (4) ============== ============== See notes to consolidated financial statements. 3 of 15 MRI BUSINESS PROPERTIES FUND, LTD. II - FORM 10-Q - MARCH 31, 1995 Consolidated Statements of Operations (Unaudited) For the Three Months Ended March 31, 1995 March 31, 1994 Revenues: Room revenue $ 8,245,000 $ 8,145,000 Food and beverage revenue 4,476,000 4,094,000 Other operating revenues 683,000 637,000 Interest 46,000 83,000 -------------- -------------- Total revenues 13,450,000 12,959,000 -------------- -------------- Expenses: Room expenses 1,979,000 1,731,000 Food and beverage expenses 3,398,000 3,108,000 Other operating expenses 5,157,000 5,459,000 Interest 1,446,000 1,487,000 Depreciation and amortization 1,595,000 1,205,000 Equity in unconsolidated joint venture's operation 23,000 45,000 General and administrative 117,000 114,000 -------------- -------------- Total expenses 13,715,000 13,149,000 -------------- -------------- Loss before minority interest in joint venture's operations (265,000) (190,000) Minority interest in joint venture's operations 20,000 81,000 -------------- -------------- Net loss $ (245,000) $ (109,000) ============== ============== Net loss per limited partnership assignee unit $ (3) $ (1) ============== ============== See notes to consolidated financial statements. 4 of 15 MRI BUSINESS PROPERTIES FUND, LTD. II - FORM 10-Q - MARCH 31, 1995 Consolidated Statements of Cash Flows (Unaudited) For the Six Months Ended March 31, 1995 March 31, 1994 Operating Activities: Net loss $ (529,000) $ (327,000) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 3,014,000 2,611,000 Minority interest in joint ventures' operations 81,000 (60,000) Equity in unconsolidated joint ventures' operation 107,000 152,000 Financing costs paid (211,000) (8,000) Changes in operating assets and liabilities: Accounts receivable and other assets 2,000 (97,000) Accounts payable, other liabilities and due to an affiliate of the joint venture partner (568,000) (619,000) -------------- -------------- Net cash provided by operating activities 1,896,000 1,652,000 -------------- -------------- Investing Activities: Settlement proceeds - 102,000 Properties and improvements additions (6,126,000) (952,000) Restricted cash decrease (increase) 1,229,000 (675,000) Purchase of cash investments - (4,444,000) Proceeds from cash investments - 6,823,000 Unconsolidated joint venture contributions - (150,000) -------------- -------------- Net cash (used in) provided by investing activities (4,897,000) 704,000 -------------- -------------- Financing Activities: Satisfaction of mortgages payable (19,874,000) - Proceeds from mortgage financing 19,400,000 - Notes payable principal payments (399,000) (431,000) -------------- -------------- Net cash (used in) financing activities (873,000) (431,000) -------------- -------------- (Decrease) Increase in Cash and Cash Equivalents (3,874,000) 1,925,000 Cash and Cash Equivalents at Beginning of Period 9,346,000 4,063,000 -------------- -------------- Cash and Cash Equivalents at End of Period $ 5,472,000 $ 5,988,000 ============== ============== Supplemental Disclosure of Cash Flow Information: Interest paid in cash during the period $ 3,094,000 $ 2,537,000 ============== ============== Supplemental Disclosure of Non-Cash Investing and Financing Activities: Equipment financed $ - $ 329,000 ============== ============== See notes to consolidated financial statements. 5 of 15 MRI BUSINESS PROPERTIES FUND, LTD. II - FORM 10-Q - MARCH 31, 1995 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. General The accompanying consolidated financial statements, footnotes and discussions should be read in conjunction with the consolidated financial statements, related footnotes and discussions contained in the Partnership's Annual Report for the year ended September 30, 1994. Certain accounts have been reclassified in order to conform to the current period. The financial information contained herein is unaudited. In the opinion of management, however, all adjustments necessary for a fair presentation of such financial information have been included. All adjustments are of a normal recurring nature. At March 31, 1995, the Partnership had approximately $596,000 invested in overnight repurchase agreements earning approximately 6% per annum. The results of operations for the six and three months ended March 31, 1995 and 1994 are not necessarily indicative of the results to be expected for the full year. 2. Transactions with Related Parties Affiliates of MGP received reimbursement of administrative expenses amounting to $54,000 and $18,000 during the periods ending March 31, 1995 and 1994, respectively. These reimbursements are included in general and administrative expenses. Pursuant to a revised management agreement between the Partnership and Marriott Hotel Services, Inc., the Partnership has increased its replacement reserve escrow (from 5% of gross revenues) to 10% of gross revenues in 1995 and 1996, 9% of gross revenues in 1997, 7% of gross revenues in 1998 and 5% thereafter to be used for renovation costs. 3. Notes Payable The Partnership's $650,000 renovation loan from Marriott on the Partnership's Somerset Marriott Hotel matured in January 1994. The Partnership has not repaid the loan. If necessary the Partnership can satisfy the loan from working capital reserves. On December 21, 1994, the Partnership satisfied the renovation loan from Marriott on the Partnership's Marriott Riverwalk Hotel in the amount of $1,487,000 plus accrued interest of approximately $126,000. The loan was due to mature December 31, 1994. The mortgages encumbering the Marriott Riverwalk Hotel were refinanced and consolidated on December 23, 1994 in the principal amount of $19,400,000. The loan requires monthly payments of approximately $185,000, bears interest at 9.85% and is being amortized over a twenty year period. The mortgage matures on January 1, 2002 at which time a balloon payment of approximately $16,319,000 will be due. A premium (prepayment penalty) is to be calculated under the terms of the mortgage if the loan is prepaid. The Partnership incurred closing costs and fees of approximately $194,000 during the year ended September 30, 1994 and $211,000 during the quarter ended December 31, 1994, in connection with this refinancing. The Partnership also paid a $640,000 prepayment penalty which is included in interest expense. 6 of 15 MRI BUSINESS PROPERTIES FUND, LTD. II - FORM 10-Q - MARCH 31, 1995 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4. Investment in Unconsolidated Joint Venture The following are the condensed balance sheets as of March 31, 1995 and September 30, 1994 and condensed statements of operations for the six and the three months ended March 31, 1995 and 1994 of the unconsolidated joint venture: MRI BUSINESS PROPERTIES COMBINED FUND NO. 1 CONDENSED BALANCE SHEETS March 31, September 30, 1995 1994 (Unaudited) (Audited) Assets Cash and cash equivalents $ 938,000 $ 561,000 Restricted cash 278,000 564,000 Accounts receivable and other assets 1,634,000 1,323,000 Real Estate: Real estate 63,116,000 62,898,000 Accumulated depreciation (17,135,000) (16,335,000) Allowance for impairment of value (11,962,000) (11,962,000) -------------- -------------- Real estate, net 34,019,000 34,601,000 -------------- -------------- Total assets $ 36,869,000 $ 37,049,000 ============== ============== Liabilities and Partners' Deficiency Accounts payable and other liabilities $ 2,786,000 $ 2,320,000 Due to affiliates 1,878,000 2,095,000 Note payable 34,000,000 34,000,000 -------------- -------------- Total liabilities 38,664,000 38,415,000 -------------- -------------- Minority interest in joint venture (904,000) (689,000) Partners' Deficiency: MRI BPF, LTD. II (445,000) (338,000) MRI BPF, LTD. III (446,000) (339,000) -------------- -------------- Total partners' deficiency (891,000) (677,000) -------------- -------------- Total liabilities and partners' deficiency $ 36,869,000 $ 37,049,000 ============== ============== 7 of 15 MRI BUSINESS PROPERTIES FUND, LTD. II - FORM 10-Q - MARCH 31, 1995 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4. Investment in Unconsolidated Joint Venture (Continued) MRI BUSINESS PROPERTIES COMBINED FUND NO. 1 CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) For the Six Months Ended March 31, 1995 March 31, 1994 Revenues $ 10,122,000 $ 10,152,000 Expenses 10,551,000 10,759,000 -------------- -------------- Loss before minority interest in joint venture's operations (429,000) (607,000) Minority interest in joint venture's operations 215,000 303,000 -------------- -------------- Net loss $ (214,000) $ (304,000) ============== ============== Allocation of net loss: MRI BPF, Ltd. II $ (107,000) $ (152,000) MRI BPF, LTD. III (107,000) (152,000) -------------- -------------- Net loss $ (214,000) $ (304,000) ============== ============== The six months ended March 31, 1994 contained twenty seven weeks. For the Three Months Ended March 31, 1995 March 31, 1994 Revenues $ 5,251,000 $ 5,024,000 Expenses 5,346,000 5,210,000 -------------- -------------- Loss before minority interest in joint venture's operations (95,000) (186,000) Minority interest in joint venture's operations 48,000 95,000 -------------- -------------- Net loss $ (47,000) $ (91,000) ============== ============== Allocation of net loss: MRI BPF, Ltd. II $ (23,000) $ (45,000) MRI BPF, LTD. III (24,000) (46,000) -------------- -------------- Net loss $ (47,000) $ (91,000) -------------- -------------- 8 of 15 MRI BUSINESS PROPERTIES FUND, LTD. II - FORM 10-Q - MARCH 31, 1995 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. This item should be read in conjunction with the Consolidated Financial Statements and other Items contained elsewhere in this Report. Liquidity and Capital Resources All of Registrant's properties are hotels, including Registrant's interest in the unconsolidated joint venture. Registrant receives hotel operating revenues and is responsible for operating expenses, administrative expenses, capital improvements and debt service payments. Registrant uses working capital reserves provided from any undistributed cash flow from operations as its primary source of liquidity. During the six months ended March 31, 1995, the Radisson South generated positive cash flow while the Marriott Riverwalk and the Somerset Marriott Hotel generated negative cash flow due to significant property improvements. The Holiday Inn Crowne Plaza, owned by the unconsolidated joint venture, experienced positive cash flow during such period. Guest room renovations continue at the Holiday Inn Crowne Plaza. During the six months ended March 31, 1995, $218,000 was spent on room renovations. Management anticipates spending an additional $750,000 to complete the renovations. The renovations will be funded by working capital and replacement reserves (restricted cash). The Radisson South spent $854,000 of cash during the six months ended March 31, 1995 for guest room and other renovations. The Marriott Riverwalk spent $3,558,000 and the Somerset Marriott spent $1,714,000 in guest room and other renovations. Management does not anticipate additional room renovations during 1995 at any of Registrant's hotels. To preserve working capital reserves and provide resources for debt restructuring, cash distributions from operations remained suspended during the first six months of fiscal year 1995. Cash distributions will be evaluated in the near future. Registrant has signed letters of intent and is negotiating to sell its Marriott Riverwalk and Somerset hotels. It is anticipated that the Riverwalk sale will take place at the end of June 1995. Registrant is also marketing its Holiday Inn Crowne Plaza and Radisson South joint venture properties for sale. If all four hotels are sold, the Partnership will be terminated and all remaining proceeds, after payment of outstanding liabilities, will be distributed to partners. The level of liquidity based upon cash and cash equivalents experienced a $3,874,000 decrease at March 31, 1995, as compared to September 30, 1994. Registrant's $1,896,000 of cash from operating activities was more than offset by $4,897,000 of investing activities and $873,000 of financing activities. Investing activities consisted of property improvements of $6,126,000 and a decrease in restricted cash of $1,229,000. The decrease in restricted cash is primarily the result of the lender releasing $823,000 of restricted cash relating to completed renovations on Registrant's Marriott Somerset property. Financing activities consisted of $19,874,000 paid in satisfaction of the mortgages encumbering Registrant's Marriott Riverwalk property, $399,000 of notes payable principal payments and proceeds of $19,400,000 from refinancing the mortgages encumbering Registrant's Riverwalk property. A prepayment premium of approximately $640,000 was paid to the former mortgagee. Mortgage costs of $211,000 (operating activities) paid during the six months ended March 31, 1995 and $194,000 paid in the prior year were incurred in connection with the refinancing. All other increases (decreases) in certain assets and liabilities are the result of the timing of receipt and payment of various operating activities. 9 of 15 MRI BUSINESS PROPERTIES FUND, LTD. II - FORM 10-Q - MARCH 31, 1995 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Liquidity and Capital Resources (Continued) Working capital reserves are primarily invested in money market accounts. The Managing General Partner believes that, if market conditions remain relatively stable, cash flow from operations, when combined with working capital reserves, will be sufficient to fund essential capital improvements and debt service payments in 1995 and the foreseeable future. A $650,000 renovation loan from Marriott on Registrant's Somerset Marriott Hotel matured in January 1994. Registrant has not repaid the loan. If necessary the Partnership can satisfy the loan from working capital reserves. Registrant has balloon payments of $14,278,000 due in December 1995 on the mortgages encumbering the Radisson South Hotel. Although management is confident that these mortgages can be replaced, there is no assurance that this will be accomplished, in which case, Registrant will be required to sell the property or risk losing its entire investment in the property. If the Radisson South is lost through foreclosure, Registrant would incur a loss of approximately $6,300,000. The mortgage encumbering the Holiday Inn Crowne Plaza, matures in July 1995. The mortgage agreement provides an option to extend the maturity date to June 1999. The new interest rate on the loan, if extended, will be approximately 12%. The Managing General Partner believes that each of the mortgages will be refinanced, if the properties are not sold, in an orderly fashion. Pursuant to the terms of a Settlement Agreement entered into in connection with the Ruben and Andrews actions, DeForest Ventures I L.P. will make a tender offer for an aggregate number of units of Registrant (including the units purchased in the initial tender) constituting up to 49% of the total number of units of Registrant at a price equal to the initial tender price plus 15% less attorney's fees and expenses. In addition, pursuant to the terms of the proposed settlement, the Managing General Partner will agree to provide Registrant a credit line of $150,000 per property, borrowings under which would bear interest at the lesser of prime plus 1% or the rate permitted by the Partnership Agreement of Registrant. A hearing for final approval of the settlement is scheduled for May 19, 1995. See Part II - Other Information, "Item 1 - Legal Proceedings". If the settlement receives final Court approval, it is expected that the tender offer will commence on or about June 19, 1995. The Managing General Partner believes that the settlement will not have an adverse effect on Registrant. At this time, it appears that the investment objective of capital growth will not be attained and that investors will not receive a return of all of their invested capital. The extent to which invested capital is returned to investors is dependent upon the performance of Registrant's properties and the markets in which such properties are located and on the sales price of the remaining properties. The ability to hold and operate these properties is dependent on Registrant's ability to obtain refinancing or debt modification as required. 10 of 15 MRI BUSINESS PROPERTIES FUND, LTD. II - FORM 10-Q - MARCH 31, 1995 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Real Estate Market The income and expenses of operating the properties owned by Registrant are subject to factors outside of Registrant's control, such as over-supply of similar properties resulting from over-building, increases in unemployment or population shifts or changes in patterns or needs of users. Expenses, such as local real estate taxes and miscellaneous expenses, are subject to change and cannot always be reflected in room rate increases due to market conditions. In addition, there are risks inherent in owning and operating lodging facilities because such properties are management and labor intensive and especially susceptible to the impact of economic and other conditions outside the control of Registrant. There have been, and it is possible there may be other Federal, state and local legislation and regulations enacted relating to the protection of the environment. Registrant is unable to predict the extent, if any, to which such new legislation or regulations might occur and the degree to which such existing or new legislation or regulations might adversely affect the properties owned by Registrant. Results of Operations Six Months Ended March 31, 1995 vs. March 31, 1994 Operating results, prior to the minority interest in joint venture's operations, declined by $61,000 for the six months ended March 31, 1995, as compared to 1994. The increase in revenues of $1,493,000 was more than offset by an increase in expenses of $1,554,000. Revenues increased by $1,493,000 due to increases in room revenues of $737,000, food and beverage revenues of $517,000, other operating revenues of $168,000 and interest income of $71,000. The increase in room revenue was attributable to increases in both occupancy and rates at Registrant's Radisson South and Somerset Marriott hotels, which was only partially offset by a decrease in occupancy at the Marriott Riverwalk Hotel. Food and beverage revenue increased at all of Registrant's hotels. Other operating revenues improved primarily due to increases in telephone and miscellaneous income at Registrant's Radisson South Hotel, which was only partially offset by a decrease in telephone revenue at the Marriott Riverwalk Hotel. Interest income increased primarily due to an increase in average working capital reserves available for investment and the effect of higher interest rates. Expenses increased by $1,554,000 for the six months ended March 31, 1995, as compared to 1994, due to increases in room expenses of $473,000, food and beverage expenses of $476,000, depreciation and amortization expense of $324,000, interest expense of $548,000 and general and administrative expenses of $20,000, which were only partially offset by decreases in other operating expenses of $242,000 and equity in unconsolidated joint venture's operations of $45,000. The increase in room expenses is attributable to the increased occupancy at Registrant's Radisson South and Somerset Hotels. Food and beverage expenses increased at Registrant's Radisson South and Marriott Riverwalk hotels. Depreciation and amortization expense increased due to property and improvement 11 of 15 MRI BUSINESS PROPERTIES FUND, LTD. II - FORM 10-Q - MARCH 31, 1995 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Six Months Ended March 31, 1995 vs. March 31, 1994 (Continued) additions. Other operating expenses decreased at Registrant's Marriott Riverwalk and Somerset Marriott Hotel, while increasing at Registrant's Radisson South Hotel. The decrease in operating expenses was primarily attributable to a decrease in occupancy and management incentive fees at Registrant's Marriott Riverwalk Hotel. The loss from Registrant's unconsolidated joint venture property (the Holiday Inn Crowne Plaza) decreased due to improved operations at the hotel. Interest expense increased due to the prepayment premium of $640,000 on the former mortgage encumbering Registrant's Marriott Riverwalk Hotel, which was partially offset due to the satisfaction of the renovation loan from Marriott on Registrant's Marriott Riverwalk Hotel in December 1994, coupled with the amortization of the mortgage principal balances. General and administrative expenses increased primarily due to increased asset management costs and reimbursed expenses. Three Months Ended March 31, 1995 vs. March 31, 1994 Operating results, before minority interest in joint venture operations, declined by $75,000 during the three months ended March 31, 1995, as compared to 1994. Revenues increased by $491,000 and expenses increased by $566,000. Revenues increased by $491,000 due to increases in room revenues of $100,000, food and beverage revenues of $382,000 and other operating revenues of $46,000, which were only partially offset by a decrease in interest income of $37,000. Room revenues increased primarily due to an increase in occupancy at Registrant's Somerset Marriott, coupled with an increase in rates at all of Registrant's hotels, which was only partially offset by a decrease in occupancy at Registrant's Marriott Riverwalk and Radisson South hotels. Food and beverage revenue increased at all of Registrant's hotels. Other operating revenues improved primarily due to an increase in miscellaneous revenue at Registrant's Radisson South Hotel, which was only partially offset by a decrease in telephone revenue at Registrant's Marriott Riverwalk Hotel. Interest income decreased primarily due to a decrease in average working capital reserves available for investment. Expenses increased by $566,000 due to increases in room expenses of $248,000, food and beverage expenses of $290,000, depreciation and amortization expenses of $390,000 and general and administrative expenses of $3,000, which were only partially offset by decreases in other operating expenses of $302,000, interest expense of $41,000 and equity in unconsolidated joint venture operations of $22,000. Room expenses increased at all of Registrant's hotels with the largest increase at the Radisson South Hotel. Food and beverage expenses increased at Registrant's Marriott Riverwalk and Radisson South hotels while remaining constant at the Somerset Marriott Hotel. Depreciation and amortization expenses increased due to significant property and improvement additions during 1995. Interest expense decreased due to the satisfaction of the renovation loan from Marriott in December 1994 on Registrant's Marriott Riverwalk Hotel. Other operating expenses decreased at Registrant's Marriott Riverwalk and Radisson South hotels, which were only partially offset by an increase at Registrant's Somerset Marriott Hotel. The decline in operating expenses was primarily attributable to a decrease in occupancy and management incentive fees at Registrant's Marriott Riverwalk Hotel. The loss from Registrant's unconsolidated joint venture property (the Holiday Inn Crowne Plaza) decreased due to improved operations at the hotel. General and administrative expenses remained relatively constant. 12 of 15 MRI BUSINESS PROPERTIES FUND, LTD. II - FORM 10-Q - MARCH 31, 1995 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Unconsolidated Joint Venture Operations (MRI BPF Combined Fund No. 1) Six Months Ended March 31, 1995 vs. March 31, 1994 Operating results, prior to minority interest, improved by $178,000 for the six months ended March 31, 1995, as compared to 1994, due to a decrease in expenses which was partially offset by a decrease in revenues. Three Months Ended March 31, 1995 vs. March 31, 1994 Operating results, prior to minority interest, improved by $91,000 for the three months ended March 31, 1995, as compared to 1994, due to the increase in revenues partially offset by an increase in expenses. The increase in revenue is primarily attributable to higher average room rates. Properties A description of the hotel properties in which Registrant has an ownership interest, together with occupancy and room rate data, follows:
MRI BUSINESS PROPERTIES FUND, LTD. II OCCUPANCY AND ROOM RATE SUMMARY Average Average Occupancy Rate (%) Daily Room Rate ($) ----------------------------- ------------------------------- Six Months Three Months Six Months Three Months Date Ended Ended Ended Ended of March 31, March 31, March 31, March 31, Name and Location Rooms Purchase 1995 1994 1995 1994 1995 1994 1995 1994 - ----------------- ----- -------- ---- ---- ---- ---- ---- ---- ---- ---- Radisson South Hotel Bloomington, Minnesota 575 11/84 64 62 61 63 74.91 72.22 74.05 72.53 Marriott Riverwalk Hotel San Antonio, Texas 500 11/84 72 79 73 81 118.36 116.53 121.91 117.13 Somerset Marriott Hotel Somerset County, New Jersey 434 09/85 68 61 68 62 87.34 85.77 88.40 86.32 Holiday Inn Crowne Plaza Atlanta, Georgia (1) 492 03/86 73 72 75 76 95.85 89.78 102.50 92.03
(1) Registrant and an affiliated partnership, MRI Business Properties Fund, Ltd. III, own a joint venture which has a 50 percent interest in this property. 13 of 15 MRI BUSINESS PROPERTIES FUND, LTD. II - FORM 10-Q - MARCH 31, 1995 PART II - OTHER INFORMATION Item 1. Legal Proceedings Lawrence M. Whiteside, on behalf of himself and all other similarly situated, v. Fox Capital Management Corporation, et al., Superior Court of the State of California, San Mateo County, Case No. 390018 ("Whiteside"). Bonnie L. Ruben and Sidney Finkel, on behalf of themselves and all others similarly situated, v. DeForest Ventures I L.P., et al., United States District Court, Northern District of Georgia, Atlanta Division, Case No. 1-94-CV-2983-JEC ("Ruben"). Roger L. Vernon, individually and on behalf of all similarly situated persons v. DeForest Ventures I L.P., et al., Circuit Court of Cook County, County Departments, Chancery Division, State of Illinois, Case No. 94CH0100592 ("Vernon"). James Andrews, et al., on behalf of themselves and all other similarly situated v. Fox Capital Management Corporation, et al., United States District Court, Northern District of Georgia, Atlanta Division, Case No. 1-94-CV-3351-JEC ("Andrews"). On March 16, 1995 the United States District Court for the Northern District of Georgia, Atlanta Division, entered an order which granted preliminary approval to a settlement agreement in the Ruben and Andrews actions, conditionally certified two classes for purpose of settlement, and authorized the parties to give notice to the classes of the terms of the proposed settlement. Plaintiffs counsel in the Vernon and Whiteside action have joined in the Settlement Agreement as well. The two certified classes constitute all limited partners of Registrant and the eighteen other affiliated partnerships who either tendered their units in connection with the October tender offers or continue to hold their units in Registrant and the other affiliated partnerships. Pursuant to the terms of the proposed settlement, which are described in the notice sent to the class members in March 1995, (and more fully described in the Amended Stipulation of Settlement submitted to the court on March 14, 1995) all claims which either were made or could have been asserted in any of the class actions would be dismissed with prejudice and/or released. In consideration for the dismissal and/or release of such claims, among other things, DeForest I would pay to each unit holder who tendered their units in Registrant an amount equal to 15% of the original tender offer price less attorney's fees and expenses. In addition, DeForest I will commence a second tender offer for an aggregate number of units of Registrant (including the units purchased in the initial tender) constituting up to 49% of the total number of units of Registrant at a price equal to the initial tender price plus 15% less attorney's fees and expenses. Furthermore, under the terms of the proposed settlement, the Managing General Partner would agree, among other things, to provide Registrant a credit line of $150,000 per property which would bear interest at the lesser of prime rate plus 1% and the rate permitted under the partnership agreement of Registrant. A hearing on the final approval of the settlement is scheduled for May 19, 1995. Item 6. Exhibits and Reports on Form 8-K. No report on Form 8-K was required to be filed for the three months ended March 31, 1995. 14 of 15 MRI BUSINESS PROPERTIES FUND, LTD. II - FORM 10-Q - MARCH 31, 1995 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MRI BUSINESS PROPERTIES FUND, LTD. II By: MONTGOMERY REALTY COMPANY 84, its Managing General Partner By: FOX REALTY INVESTORS, its Managing General Partner By: NPI Equity Investments II, Inc., its Managing Partner ------------------------------------- ARTHUR N. QUELER Secretary/Treasurer and Director (Principal Financial Officer) 15 of 15 EX-27 2 FINANCIAL DATA SCHEDULE
5 The schedule contains summary financial information extracted from MRI Business Properties Fund, Ltd. II and is qualified in its entirety by reference to such financial statements. 1 6-MOS SEP-30-1995 OCT-01-1994 MAR-31-1995 6,164,000 0 4,140,000 0 826,000 0 138,907,000 (67,169,000) 84,025,000 0 56,080,000 0 0 0 21,227,000 84,025,000 0 27,762,000 0 24,622,000 0 0 3,465,000 (529,000) 0 (529,000) 0 0 0 (529,000) (6) (6) Cash includes $692,000 of Restricted Cash Receivables include $1,054,000 of other assets Depreciation includes $10,948,000 of allowance for impairment of value
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